Narrow 'fiscal cliff' bargain gains currency

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WASHINGTON • Hopes dimming for a wide-ranging bargain, the White House and many congressional Republicans are setting their sights on a more modest deal that would extend current tax rates for most Americans, raise rates for top earners and leave other, vexing issues for the new year.

President Barack Obama and House Speaker John Boehner met late Thursday for less than an hour at the White House, but there were few signs of progress. Both sides agreed to describe the talks as "frank," a less than optimistic assessment that suggested the president and the speaker stuck to their opposing positions.

Boehner was sticking with his plans to leave for his home state of Ohio on Friday, limiting opportunities for further in-person talks in the coming days.

While Boehner took the lead in negotiations, a growing number of Senate Republicans were calling on their House colleagues to yield on their opposition to letting top tax rates increase on income over $250,000 for couples, while extending Bush-era tax cuts for everyone else.

Such a step would require capitulating to Obama's demands, but it would leave other fiscal issues unsolved until 2013, including an increase in the nation's borrowing limit. Republicans have insisted that the debt cap is a key piece of leverage to extract spending cuts from the Obama administration.

"I think it's time to end the debate on rates," Sen. Richard Burr, R-N.C., said. "It's exactly what both parties are for. We're for extending the middle-class rates. We can debate the upper-end rates and what they are when we get into tax reform."

"He's got a full house and we're trying to draw an inside straight," Sen. Johnny Isakson, R-Ga., said. When it was observed that making a straight would still be a losing hand, Isakson said: "Yeah, I know."

White House spokesman Jay Carney conceded that "one aspect of a way to deal with this at the very least would be to pass the tax cuts for 98 percent of the American people. That would deal with a chunk of the so-called fiscal cliff."

But he said Obama remained committed to a broad deal that combined existing spending cuts and reduced the deficit significantly. "He doesn't want to pass up that opportunity," Carney said.

A narrow deal, involving only an increase in top marginal rates for top income earners would guarantee a second round of negotiations and brinkmanship over the debt ceiling.

Carney took a hard line on using the debt ceiling as leverage.

"We cannot play this game, because while it might be satisfying to those with highly partisan and ideological agendas, it's not satisfying to the American people and is punishing to the American economy," he said. "We cannot do it."

Thursday evening's meeting came shortly after Obama suggested that the sluggish pace of deficit-cutting talks between the administration and congressional Republicans was a result of a "contentious caucus" of GOP lawmakers who were making it difficult for Boehner to negotiate.

Boehner saw it differently. "Unfortunately, the White House is so unserious about cutting spending that it appears willing to slow-walk any agreement and walk our economy right up to the fiscal cliff," he said earlier in the day.

Thursday night's meeting was the two men's second face-to-face encounter in five days as they seek to find an agreement that avoids major tax increases and across-the-board spending cuts scheduled to kick in in January.

Boehner remains caught between a tea party faction and more pragmatic Republicans advising a tactical retreat. He dodged two questions on whether he would allow Obama's proposal for higher tax rates for upper earners to proceed despite GOP opposition to the idea. Such an approach was employed by then-Speaker Nancy Pelosi, D-Calif., when funding military operations in Iraq and Afghanistan when Democrats controlled Congress but President George W. Bush occupied the White House.

Obama, in an interview during the day with WCCO-TV in Minneapolis, said that the notion of not raising taxes "has become sort of a religion for a lot of members of the Republican Party. I think Speaker Boehner has a contentious caucus, as his caucus is tough on him sometimes so he doesn't want to look like he's giving in to me somehow because that might hurt him in his own caucus."

While the impasse over the president's demand for higher tax rates continues to be a main obstacle in negotiations, Boehner complains that the president refuses to offer spending cuts to popular benefit programs like Medicare whose costs are rapidly rising.

The White House has pointed out that it has offered about $600 billion in specific savings over the next decade, including about $350 billion in spending reductions in health care programs such as Medicare.

Particularly noteworthy were comments by Sen. John Cornyn of Texas to Politico.com, in which Cornyn, soon to be the No. 2 Senate Republican, said, "I believe we're going to pass the $250,000 and below sooner or later, and we really don't have much leverage" because those rates are going to expire anyway on Dec. 31.

Cornyn is a top confidant of Senate Republican leader Mitch McConnell of Kentucky, who keeps a tight rein on the Senate GOP caucus.

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